Thursday, April 23, 2015

I would fire your financial advisor if he or she
either, owns the shares of Tesla
Motors, owns a Tesla or, even worse,
owns both the shares and a Tesla.

First, the fundamentals: I see in today’s Globe and
Mail that Peter Cheney drove a Tesla Model S from San Diego to Squamish, B.C, with only
electricity as fuel. Well that “only electricity as fuel “claim is misleading because
the Tesla batteries in reality just store energy that comes from somewhere
else. Somewhere else could be electricity from solar, turbines, nuclear, hydro or
a gas or coal fired power plant.

When charging your Tesla batteries, do you get to
choose the energy source? Will that be ugly solar, ugly bird killing turbines
that never get removed, scary nuclear, fish killing hydro dams, gas from hydraulic
fracturing or dirty coal? If you believe in global warming maybe we should have
fewer cars and more public transit.

Tesla skips the traditional dealer model and sells in
shopping malls and online to eliminate the dealer. OK so where do you go for pre
and post warrantee work?

Tesla is a small, specialty luxury car company that
depends on taxpayers to survive. According to the Globe and Mail item - Jeremy
Cato – “How Tesla and other EV makers benefit from taxpayer funding is
frightening. At the end of the chain are subsidies for EV buyers – up to $8,500
in Ontario, Quebec
and B.C., up to $12,500 in the United
States. Cato also says the balance sheet is
frightening. Assets barely exceeded liabilities at the end of 2014:
$5.85-billion to $4.94-billion

So with the Model S you pay about 100 grand and get
no dealer support, no selection of a power source, no assurance the company
will survive and, what will a five year old Model S be worth on a trade-in for
a BMW’ i8 or Nissan’s Leaf?

Before we look at the technical picture I should
mention that today’s gasoline powered internal combustion engine is not the
same thing your granddaddy used to drive. Today’s engines are smaller, with
more power per litre thanks to fuel injection, direct injection, variable valve
timing and turbo chargers and they emit almost zero emissions.

The technical picture is moderately poor as our chart
displays a weekly plot of TESLA trading just below (not shown) its 40-week
simple moving average. The money flow numbers have been flat from early 2014 to date. Most alarming
is the huge bearish rising wedge formation and the subsequent breakdown. To repair some of the damage –
TSLA needs to break
above $125 on volume of at least 15 million shares

Thursday, April 16, 2015

All I know about seasonality is that in an uptrend –
you buy-low, sell-high and then buy back even higher. In a downtrend, - you
sell-high, buy-low and then sell even lower.

Now we are approaching this annual Sell-in-May thing
where your advisor is supposed to call you and recommend selling out your
equity portfolio “because it is May”. Quite a silly strategy and unlikely to
happen today, because most of the advisors I know are very bright and highly
educated. That TV ad run by Interactive Brokers depicting a “broker” to be a sleepy
fungus does not represent the advisors I know. .

Sorry – I lost my focus – anyway I am sure your advisor
would suggest the current leadership from the US banking sector is very bullish. According
to ALPS Portfolio Solutions Distributor, Inc the Sector SPDR Financial ETF
(XLF) is a wide array of diversified financial service firms are featured in
this sector with business lines ranging from investment management to
commercial and investment banking.

Wednesday, April 8, 2015

The collapse in the price of crude that began back in
July 2014 has been blamed on several fundamental problems. Some experts point
to US
over-production due to hydraulic fracturing (also hydrofracturing), others
blame Sunni vs. Shia political / crude production conflict and others blame
slowing global demand.

Our chart displays the price of crude – monthly spanning
about twelve years plotted above the U.S. dollar index. Note the obvious
inverse relationship with each price peak in one lining up with a price trough
in the other.

Note the 2008 financial price trough in crude and the
respective 2008 financial price peak in the U.S. dollar – and note the current
price levels marked as (A) and (B). Crude did not break below the 2008 low to “confirm”
the recent dollar price break
to (B). This appears to be a positive divergence setup which means that a crude
price below $40 is not likely.

About Me

Bill has been writing a weekly business column in the Toronto Star since 1997, and was an early contributor to the former “Report on Business Television”. He has founded the Getting Technical Market Newsletter in December 1998.
Bill is also an Instructor for the Canadian Securities Institute. He is also a contributing author of the textbook for the technical analysis course offered by the Canadian Securities Institute (CSI. He is also called upon to provide training to industry professionals on technical analysis at many of Canada’s leading brokerage firms.
In February 2010 Bill became a technical sub-advisor to Stonebrooke Asset Management Ltd. who manages the Hybrid Investment Program under the Elite Wealth Strategies program for Union Securities Ltd..
The relationship ended in Feb 2012 but over the 24 month period the Hybrid Program enjoyed five technical selections that were the subject of takeover bids namely, Gerdau Ameristeel, El Paso Corp, Biovail Corp. Viterra Inc. and ShawCor Ltd